Illustration: Craig Stephens
Michael Tai
Michael Tai

The US trade war can’t derail China’s development – here are three reasons why

  • China’s tech progress has already reached a turning point, its size grants it unusual abilities and its population is conditioned to be entrepreneurial; the trade war won’t change any of this
If the US trade war aims to hold back China’s development, it may already be too late. Regardless of the outcome of tensions, China will almost certainly continue its present trajectory. Here’s why.

First, China has already reached critical mass in technological capacity. It has moved from imitator to innovator, and become a world leader in areas such as solar energy, mobile payments and high-speed rail.

In 2011, the Royal Society saw the landscape changing “dramatically” when China overtook the UK to become the second-leading producer of research publications.

Kai-Fu Lee, former president of Google China and an expert on artificial intelligence, believes China is rapidly becoming a global leader in AI and may surpass the United States – 5G is only one of several crucial technologies where the US has fallen behind due to policy missteps.

By deciding against a single telecommunications standard, the US fragmented its telecoms industry and has no 5G contender today. The fastest supercomputer, the largest radio telescope and the first landing on the dark side of the moon are other feathers in the Chinese cap.

Second, the size of the Chinese domestic market provides important advantages when it comes to innovation.

China has the world’s largest fintech market, where digital payments are 50 times larger than the US, while its three biggest internet companies – Baidu, Alibaba and Tencent – are investing in machine learning and artificial intelligence.

AI is built on big data, and because of its vast number of internet users, China has caught up to the US at an unexpected pace.

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Economies of scale allow quicker recovery of R&D and tooling expenditure, translating into a cost advantage over rivals, especially in sectors requiring heavy front-end investments such as hi-speed rail, nuclear power plants, solar panels, power turbines, electric vehicles and drones.

China's advantage is no longer low-cost labour but its enormous pool of hands-on technicians and engineers able to turn blueprints into prototypes, sometimes in a matter of days.

Nevertheless, there is nothing original or unique about the Chinese development model.

China is essentially replicating many of the policy features of Japan, South Korea, Taiwan and Singapore at an earlier developmental stage when the state steered the economy and controlled key sectors such as banking, telecommunications, steel and energy.

Indeed, this state-led model was practised by the United States, Britain, France and Germany, too, during the 19th century and first half of the 20th centuries, as Cambridge economist Ha-Joon Chang points out.

Consider president Franklin D. Roosevelt's New Deal programmes to spur the US economy in the 1930s, or French state ownership of and intervention in key industry sectors up until today.


Even China's authoritarian, one-party rule is nothing extraordinary; Taiwan, South Korea and Singapore were equally authoritarian.

South Korea saw rapid economic growth under presidents Park Chung-hee and Chun Doo-hwan, both military men who restricted civil liberties and controlled the judicial system, while Taiwan's economic miracle happened under one-party rule and martial law was not lifted until 1987.


Singapore has effectively been a one-party state since 1965 and the same could be said of Japan, under the Liberal Democratic Party since 1955 (except for brief hiatuses in 1993-1994 and 2009-2012).

One-party rule with a competent bureaucracy can enable stable, long-term policy planning and execution.

This advantage is starkly illustrated by Taiwan, whose economy has floundered since the mid-1990s as frequent changes of government and policies deter investors and undermine the morale of civil servants no longer certain if their work will have any lasting effect.

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But China's rise, in tandem with the Asian tigers, is also powered by cultural character, a factor often overlooked by economists. If England is a nation of shopkeepers, to quote Adam Smith, China is a nation of entrepreneurs.

Chinese business sense first caught the attention of Europeans in the colonies of Southeast Asia.

British colonial officer Francis Light observed that “they possess the different trades of carpenters, masons, and smiths, are traders, shopkeepers and planters … [and] are the only people of the East from whom a revenue can be raised without expense and extraordinary efforts of Government…”

American anthropologist and explorer David P. Barrows considered the way “their keen sense for trade and their indifference to physical hardship and danger, make the Chinese almost a dominant factor whenever political barriers have not been raised against their entry”.

Confucian virtue can be compared to the Weberian Protestant ethic. The Chinese language is full of maxims exhorting learning and hard work, and anyone who has been to China will not fail to notice the way hardship is accepted as a normal part of life.

Barbers are on their feet 12 hours a day while the repair of shoes and clothing to mobile phones and computers is easily and affordably available.

To stay ahead of the competition, some companies practice a “996” work regime (9am to 9pm, six days a week) – the subject of vigorous debate on Chinese social media recently.

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Hong Kong tycoon Robert Kuok calls the Chinese the “most amazing economic ants on Earth” but their success draws both admiration as well as envy and angst, and not unlike the Jews, the Chinese often face discrimination, expulsion and violence.

In 1882, US Congress passed the Chinese Exclusion Act which effectively barred Chinese from the United States for several decades.

The act was repealed in 1943 but quotas remained in place until 1965. President Donald Trump's tariffs and entity list represent the latest round of exclusion which may succeed in delaying – but not derailing – China's development.

Michael Tai is professor of development studies at the Beijing Institute of Technology and author of US-China Relations in the 21st Century: A Question of Trust